COLUMBIA BANKING SYSTEM, INC. Q4 FY2024 earnings call

• Clint Stein highlighted an 8% decrease in normalized core expense base, net interest margin improvement, 8% increase in pre-provision net revenue, and 29% increase in net income. Mentioned 5 branches to open in 2025, ongoing technology investments including a new business online banking platform, and plans for real-time payments, digital solutions, and data analytics. Addressed wildfires and community response.
• Ronald Farnsworth discussed EPS, balance sheet movements, NIM, provision for credit loss at $28 million, noninterest income, expense details, and regulatory capital position with CET1 at 10.5% and total risk-based capital at 12.6%.
• Torran Nixon talked about deposit growth momentum, seasonal deposit patterns, commercial loan growth, and core fee income growth including treasury management and trust revenue.
• Frank Namdar spoke about loan portfolio quality, classified loans declining, and charge-offs in the transportation sector of the FinPac leasing portfolio.

In the fourth quarter, operating EPS was $0.71, operating return on average tangible equity was 16%, and operating PPNR was $229 million. Loans totaled an increase of $178 million, with commercial loans up $228 million (9% annualized) and CRE loans down $50 million. Deposits were up $200 million while borrowings declined $550 million. Net interest margin was 3.64%, down 14 basis points from the year-ago quarter but up 12 basis points from the first quarter. Noninterest income was $50 million, GAAP expense was $267 million, and operating expenses were $263 million. Operating noninterest income for Q4 was $55.3 million compared to $59.6 million in Q3.

• Expect seasonal deposit decline in Q1 2025 with net increase in wholesale funding up to $0.5 billion. Normalized operating expense expected $1 billion to $1.01 billion in 2025. CDI amortization expected to decline slightly in Q1 then settle at ~$26 million for Q2 forward with full year 2025 amount at $105 million. Capital ratios expected to continue building.
• Reinvestment plans include 5 branches opening in 2025, hiring bankers, and ongoing technology investments.

• Seasonal deposit flows can impact net interest margin.
• Interest rate changes may affect funding costs.
• Credit quality fluctuations could impact provision for credit loss.

Q: Jeff Rulis asked about capital deployment in 2025.

A: Clint Stein said they continue to generate capital in excess of requirements and regulatory targets, and will be opportunistic with capital actions.

Q: Jeff Rulis asked about single-family mortgage opportunity.

A: Chris Merrywell and Clint Stein said they are committed to home lending for customers' relationship basis, with goal to have single-family resi portfolio at about half current level.

Q: Jon Arfstrom asked about deposit repricing.

A: Ronald Farnsworth said there's over $8 billion of wholesale funds over next six months and $1.2 billion of CDs maturing, with opportunity to reprice deposits.

Q: David Feaster asked about small business campaigns.

A: Christopher Merrywell said campaigns are effective with mid-80s retention, average balances increasing, and cross-selling to other products.

Q: David Feaster asked about loan growth drivers.

A: Torran Nixon said loan growth is from momentum, hiring, and diversified footprint growth.

Q: Matthew Clark asked about deposit rate repricing and beta.

A: Ronald Farnsworth and Christopher Merrywell discussed deposit rate repricing opportunities and beta expectations around 55% through the cycle.

Q: Anthony Elian asked about expense guide and branch build-out.

A: Ronald Farnsworth and Clint Stein discussed expense guide range and inclusion of branch build-out and hires in expenses.

Q: Samuel Varga asked about margin and credit allowance.

A: Clint Stein and Ronald Farnsworth talked about margin fluctuations and normal credit allowance fluctuations.

Q: Jonathan Rau asked about margin recovery by end of 2025.

A: Clint Stein and Ronald Farnsworth said margin recovery depends on seasonal deposit flows and customer deposit flows.

Q: Chris McGratty asked about balance sheet optimization.

A: Clint Stein said they are letting transactional portfolios amortize off and waiting for favorable market conditions to reprice them